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On today’s TSX Breakouts report, there are 39 stocks on the positive breakouts list (stocks with positive price momentum), and 52 stocks are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a stock that is just 3 per cent away from appearing on the positive breakouts list. For long-term investors, the stock has delivered solid returns rallying approximately 600 per cent over the past decade from below $5 to over $32. Year-to-date, the share price is up nearly 13 per cent. The stock has 10 buy recommendations with an expected price return (not including the dividend yield) of over 10 per cent. Discussed below is Quebecor Inc. (QBR.B-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

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The company

Quebec-based Quebecor Inc. is a telecommunications and media holding company. Quebecor has three core business segments: telecommunications; the media segment, with the television broadcaster, TVA Group; and its smallest segment, sports and entertainment.

Before the market opened on May 9, the company reported first-quarter financial results that fell short of the Street’s expectations. Revenue increased 2.5 per cent year-over-year to $1.03-billion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $420.7-million, below the Street’s expectations of $431-million. Reported EBITDA from the Telecom segment increased 1.4 per cent to $423-million from $417.2-million reported during the same period last year. Adjusted earnings per share was 44 cents. Wireless ABPU (average billing per user) declined to $52.50 from $53.25 as a result of a higher number customers under the company’s BYOD (bring-your-own-device) programs. The monthly churn rate was unchanged at 1.3 per cent year-over-year. The share price declined 1.6 per cent that day.

Returning capital to shareholders

Last month, the company more than doubled its quarterly dividend to 11.25 cents per share from 5.5 cents per share. This equates to a yearly dividend of 45 cents and a current annualized yield of 1.4 per cent.

The company plans to steadily increase the dividend over the next few years to a target free cash flow payout ratio of between 30 per cent and 50 per cent within the next three years.

During the first quarter, the company repurchased 1,319,600 shares under its share buyback program.

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Analysts’ recommendations

There are 13 analysts providing recent research coverage on this company, of which 10 analysts have buy recommendations and three analysts have hold recommendations.

Last month, several analysts revised their expectations. Of note, Barclays’ analyst Phillip Huang increased his target price to $37 from $33. Bob Bek, the analyst at CIBC World Markets increased his target price by $1 to $35. BMO’s Tim Casey raised his target price to $37 from $36. Scotiabank’s Jeffrey Fan lifted his target price to $37 from $35. Cormark’s Dave McFadgen raised his target price by $1 to $36. Rob Goff at Echelon Wealth Partners revised his target price to $38 from $36.

Taking an opposing position, Vince Valentini, the analyst at TD Securities, trimmed his target price to $38 from $39. Maher Yaghi, the analyst at Desjardins Securities, cut his target price to $35 from $36.

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Financial forecasts

The Street is forecasting EBITDA of $1.83-billion in 2019, rising to $1.9-billion in 2020. Earnings per share is anticipated to come in at $2.06 in 2019 and increase to $2.25 in 2020.

In recent months, financial expectations have increased. For instance, four months ago, the consensus EBITDA estimates were $1.79-billion for 2019 and $1.87-billion for 2020, and earnings per share expectations were $1.95 for 2019 and $2.11 for the following year.

Valuation

According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 7.8 times the 2020 consensus estimate, above its three-year historical average multiple of 7.3 times but below its peak multiple of over 8.2 times.

The consensus one-year target price is $35.81, suggesting the share price may increase by more than 10 per cent over the next 12 months.

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Target prices range from a low of $31 (from Aravinda Galappatthige, an analyst at Canaccord Genuity) to a high of $38 (from TD Securities’ Vince Valentini and Echelon Wealth’s Robert Goff). Individual target prices provided are as follows in numerical order: $31, $34, three at $35, two at $36, $36.50, three at $37, and two at $38.

Insider transaction activity

Year-to-date, two insiders have reported trades in the public market.

On March 19, chief operating officer and chief legal officer Marc Tremblay exercised his options, receiving 180,000 shares at a price per share of $15.1183 and sold 118,680 shares at an average price per share of approximately $31.45, leaving 69,720 shares in his account.

On Jan. 25, director Chantal Bélanger purchased 1,000 shares at a cost per share of $30.45, initiating a portfolio position.

Chart watch

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The long-term chart is positive with the share price remaining in a multi-year uptrend. The share price is just 3 per cent below its record closing high. Year-to-date, the share price has increased a respectable 13 per cent.

In terms of key resistance and support levels, the next major ceiling of resistance is near its record closing high, around $33.50. After that, there is resistance around $35. Looking at the downside, there is strong technical support around $30, near its 200-day moving average (at $29.68).

The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Tickers mentioned in this story

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